LONDON – For a man informing Britain that its economy will take a £122 billion hit, Philip Hammond could be forgiven for enjoying himself.

The chancellor of the exchequer, known in political circles as "spreadsheet Phil," broke the news to MPs that the cost of Brexit, as measured by the increase in government borrowing needed to mitigate against its effects, will be a cool £59 billion over five years.

In the first major economic announcement from the government of Prime Minister Theresa May, the chancellor delivered a gloomy message, revealing that Britain’s economy is set for a period of lower than forecast growth, higher borrowing and a squeeze on household finances.

Yet Hammond could relish the occasion. Despite the miserable figures calculated for the Treasury by the independent Office for Budget Responsibility (OBR), Wednesday’s Autumn Statement, a budget in all but name, will strengthen Hammond’s hand in the battle over Britain’s withdrawal from the European Union.

On the most basic level, Hammond’s dull but competent performance boosts his own authority within government. He’s a novice chancellor, but he projects grown-up competence at a time when the nation craves reassurance. What's more, such grim figures underline Hammond’s argument that Britain can’t risk a “hard” departure from the Union.

Reckoning with reality

The chancellor has been on the back foot since his appointment following June's referendum.

The economy hasn’t performed as badly as some analysts — notably those in the Treasury, under Hammond's predecessor George Osborne — predicted. Britain hasn’t tipped into recession. To Euroskeptics, this so-called "Brexit bounce" is evidence that the U.K. can thrive outside the Union.

The measured statement, from the cabinet's leading “soft Brexit” voice, looked like a shrewd exercise in managing the country’s expectations.

“It’s a reflection of the resilience of the economy and that Brexit is not proving to be the economic catastrophe many on the Remain side were predicting,” Suella Fernandes, the MP who led a group of 60 Euroskeptics in calling last week for a clean break from the single market and the customs union, told POLITICO.

All summer, Euroskeptics voiced frustration at the so-called "Bremoaners," who, as veteran Euroskeptic backbencher John Redwood said of the Treasury, continued to look at everything through “ridiculously pessimistic Brexit glasses.”

The OBR projections make it difficult to argue that the British economy looks anything other than fragile — and many ordinary people who voted for Brexit stand to be the worst hit.

Perhaps the most eye-watering statistic to emerge from the OBR’s 271-page forecast, was the £22o billion additional borrowing by 2020, compared to the OBR’s pre-referendum projections. Significantly for a budget that was supposed to help working men and women, real earnings growth is projected to slow to almost zero next year.

“We are in for a long decade of austerity,” said one minister on the soft Brexit side of the debate. “Hardcore Brexiteers see any reckoning with reality as subverting the Brexit argument. Talking about the fiscal debt pile getting worse is not something they want to hear, but that’s the reality.”

The measured statement, from the cabinet's leading “soft Brexit” voice, looked like a shrewd exercise in managing the country’s expectations, as well as a warning to Hammond’s hard-line colleagues pushing for a withdrawal from the single market and customs union that Britain can ill-afford such a leap in the dark.

“He’s going to dish the medicine and call it as he sees it, not play politics with it,” said the minister, speaking on condition of anonymity. “He is hamming up the ‘spreadsheet Phil’ image because that is his protection in the cabinet.”

With the deteriorating public finances giving Hammond little wiggle-room, there were few of the vote-grabbing policy treats that previous chancellors such as George Osborne and Gordon Brown liked to sprinkle through their Budgets and Autumn Statements.

To the extent there were concessions, they were targeted at blue collar workers, those "just about managing" now known in Westminster as Jams: £1.4 billion for 40,000 affordable homes, banning letting agents’ fees, a reduction in the rate at which benefits are withdrawn from people once they start working.

Some Tory MPs — especially those who, like both May and Hammond, backed remaining in the EU — worry that many people voted to leave not just as a way of thumbing their noses at the political classes, but in the hope it would deliver money in their pockets. Left behind by globalization, these voters believed (and were told during the campaign) that they would get cheaper homes, more money for health services and shorter waiting lists for schools and public services if Britain left the EU because there would be fewer immigrants competing for resources.

“Brexit won’t deliver those things. How are the public going to feel when they discover that?” said one senior Conservative MP.

Downing Street hopes the Jams strategy will ensure that Brexit voters feel like something has improved, despite a tight budget.

Others doubt such measures will make much difference in the long run.

“The government is traveling without a road map on Brexit and has now provided no more than a few pea shooter tweaks to alleviate the plight of people who are feeling the pressure,” former Deputy Prime Minister Nick Clegg told POLITICO. “The idea that anything in this Autumn Statement could in any way materially offset the very real squeeze that is now impending for household finances and public services is self-evidently laughable.”

Clegg said he was “extremely worried” by Wednesday’s figures.

“These official forecasts have been horribly wrong this year, and there is no sign that they are learning their lesson and focusing on the data" — Professor Patrick Minford

In his view, anything other than a soft Brexit will be catastrophic for the livelihoods of families struggling to get by. “I hope we will dodge the bullet but the underlying figures from the OBR just add to my concern that we are in a more perilous position economically over the next year or two probably than at any time since the 2008 crash,” he said.

Doubting the forecasts

Euroskeptics cast the OBR — and, by extension, Hammond himself — as too pessimistic. The Economists for Brexit group, co-chaired by Boris Johnson’s ex-economics adviser Gerard Lyons, was strident in its criticism.

“These official forecasts have been horribly wrong this year, and there is no sign that they are learning their lesson and focusing on the data, rather than vague guesswork about emotions," said Professor Patrick Minford, co-chair of the group. "The irony is that much of this so-called uncertainty in the U.K. economy is, in fact, being driven by these pessimistic forecasts making worse-case assumptions.”

On Minford’s analysis, Britain’s GDP would grow by 4 percent over the long term if it leaves the single market and strikes its own trade deals under World Trade Organization rules.

The OBR didn’t seem entirely sure of its own assessment, adding huge caveats to its forecasts.

Its assumptions about Britain’s post-Brexit trading arrangements, the confidence of overseas investors, business investment, and the impact of the fall in sterling on consumer prices, were all uncertain.

“There is little by way of precedent to guide the assumptions that have been factored into our forecast, so invariably future forecasts will need to be revised as we learn more about how policy will change and how the economy will respond," their outlook said.

Britain is heading down an uncertain road, and nobody knows exactly where it will lead, or how much pain it will suffer along the way. As for Hammond, he'll walk that road with a little more spring in his step. At least for today.

Maverick

I do not envy the Or. How can it possibly forecast the Economy with any degree of accuracy with so many variables and unknowns. It had the potential to have more holes in it than Swiss cheese. If the future is more positive they will be berated as doom mongers and pessimistic. If it is more negative they will ve chastised for being imbeciles. A completely unenviable task. Their only option is to err on the side of negative with lots of caveats and if things come good it’s a bonus. It’s better to be labelled as a doom monger than an imbecile.

Posted on 11/24/16 | 12:16 AM CET

Latimer Alder

A small price to pay to rid us for ever of rule by the antidemocratic Brussels bastards.

Posted on 11/24/16 | 8:39 AM CET

Jack Spurling

Good for Chancellor Hammond but bad for Britain and British people. Positive-negative spin always works wonders in Britain today pretending things will get better. The consequences of BREXIT will appear next year as the economy falters with reduced foreign investment and more austerity in basic services like the NHS. N

Nationalism always appears when social conditions deteriorate beyond what is tolerable by the majority. Britain just got eaten alive by the Daily Express angry brigade in search of a new rest-home far far away from Europe.

Posted on 11/24/16 | 8:42 AM CET

CSK

I don’t think that anyone can be too surprised by either the projected figures or in the way that this government is handling the situation. Given all the ‘unknowns’ surrounding Brexit, their goal is to try and manage the fall-out and ‘steady the ship’, while at the same time put together a coherent strategy to see Britain through the next few years.

Given the reality of the situation, I think that Hammond has handled his first official ‘budget’ statement rather well, with the reality of the economics coupled with some positive aspects. Far more authoritative than his slippery predecessor, Osborn.

No one, least of all Clegg or Labour are in a position to scoff at the government’s handling of the situation. Clegg was happy to have his nose in the trough of the Cameron LibDem coalition, and he was part of the pre-referendum argument – the result of which speaks volumes for his (and Labour’s) efforts.

Therefore, for Clegg to constantly court media attention and continue moaning about post-Brexit economic woes shows that he is neither able nor fit to govern, for he has not come up with one positive or constructive comment to aid the situation or help stabilise the country. His overall performance to-date fully reflects and explains why the country has never elected the LibDems to (sole) power.

Posted on 11/24/16 | 11:49 AM CET

Maverick

No surprises really…Hammond when interviewed on TV

Q: Are you saying you don’t believe the OBR forecasts? The media says you take these forecasts with a pinch of salt.

Hammond says “forecasting is not a precise science. The OBR itself says there is a large degree of uncertainty. The government should not ignore these forecasts. It should include them in the range of possibilities for which it plans. It should not ignore the strengths of the economy. And it is right to keep something aside.”

Q: You seem to be distancing yourself from the forecasts.

“There is a wide degree of uncertainty”, says Hammond.

Q: So it may be tosh?

Hammond says “there are many factors causing uncertainty”.

Posted on 11/24/16 | 12:23 PM CET

Maverick

Other news just to keep things in perspective

Euro hits 20-month low: The euro has fallen to its lowest level against the US dollar since March 2015 in early trading. The single currency has dropped by 0.25% at the open to $1.052, a 20-month low.

3rd Qtr Average Growth in Eurozone: 0.3%

Germany: Growth has a it a 1 year low. Government spending climbed 1% and private consumption rose 0.4% in the three months through September, while exports contracted 0.4%, the Federal Statistics Office in Wiesbaden said on Thursday.

Posted on 11/24/16 | 12:46 PM CET

Reginald Maudling

When in doubt print billions to fill the gap. Debt-hungry Britain hanging-on while climbing higher and higher. Dont look down now but the air is getting thinner and edge of the cliff within sight. Bankers on a roll and enjoying their winning streak since 2008 US financial crash; savers lost in the shuffle. Its called crisis management with new governments making detours in circles fiddling the figures….no inflation written in stone forever.

Posted on 11/24/16 | 12:48 PM CET

Roger Thornhill

A cheaper euro provides real benefits for the European economy such as moderate price inflation and drivingup exports. Lower German exports more to do with China slowdown. Europe trading in Russia will improve matters once we get the US trade sanctions out of the way. Britain remains the joker in the pack and will need to make a deal with the EU on a new tariff regime. Doubtful that a Trump Presidency will help the UK as the EU will remain more important in pure economic terms; especially with the UK in long-term economic decline with damaged currency. Even Germany seems to agree with France to let the UK disembark from the EU as soon as possible.

Posted on 11/24/16 | 1:15 PM CET

Sprout

@Maverick As a Finn falling euro can only be a good thing. Since the economy went into the crapper the government has dithered over internal devaluation, with reason maybe, but also without any meaningful results. A sharply falling euro could be the kick in the ass our economy needs right now.

Posted on 11/24/16 | 1:23 PM CET

Maverick

@Sprout

Fully understood it is the same as the British pound which the IMF suggested was 13% overvalued last year anyway. My comments are just stating that there is a general unease to pout things into perspective. Nothing more.

Posted on 11/24/16 | 1:29 PM CET

Ray Martinez

Wow…”By the end of October 2016, the ECB has bought 1148 billion euros of bonds under its public sector purchase program (PSPP)” just wow

Posted on 11/24/16 | 4:22 PM CET

Tom Cullem

Or how little pain Britain will suffer along the way. The OBR also stated that the economic impact of BREXIT was likely be “mild” and about two years in duration. The US will very likely offer the UK a juicy trade deal. No crash in housing prices, and the OBR also projected that no jobs will be lost due to BREXIT, but will to Osborn’s “apprentice levy” and the ardently supported living wage, both of which will exert downward pressure on unemployment. And, of course, the euro and eurozone are also suffering low growth and ditching Trident and a few other useless programs could plug that hole in no time. The fall in migration is also a benefit – they won’t need all those school places, housing, and health services, lessening pressure in other ways on the economy.

All the doom and gloom economic projections pre-referendum failed to materialise. Consumer confidence remains high – retail sales hit a 7 year high this autumn.

Britain isn’t going anywhere except forward.

Posted on 11/24/16 | 4:35 PM CET

sara kennedy

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Posted on 11/24/16 | 8:10 PM CET

Thucydides

Toning down expectations is most sensible at this stage, regardless of one’s attitude to Brexit.